Can You Fix a Mistake in a Contract after Everyone Signs It?

The answer is – sometimes.  A recent case in Connecticut provides an example of how courts can offer a remedy for unilateral and mutual mistakes in a contract by an action for contract reformation.  The case was Stamford Property Holdings, LLC v. Dorian Jashari, et al.

In the case, a plaintiff lessor sued defendant lessees, J and I, for the reformation of a commercial lease based on unilateral or mutual mistake. The dispute centered around a car wash facility owned by the plaintiff and leased by the defendants. The crux of the controversy was a ‘triple net’ provision, a commonly used term in leases that makes lessees responsible for certain expenses related to insurance, maintenance, and real estate taxes in addition to the base rent.

The initial negotiations between the parties and the letter of intent contained this ‘triple net’ provision, however, the provision was inadvertently left out by the plaintiff’s attorney in the final lease. When the plaintiff subsequently sent J an invoice that included reimbursement for real estate taxes, J refused to pay, and the plaintiff took the matter to court.

Following a bench trial, the court sided with the plaintiff, reforming the lease to include the ‘triple net’ provision and ordering the defendants to reimburse the plaintiff for the real estate taxes. The defendants appealed.

Addressing the appeal, the appellate court upheld the trial court’s judgment, albeit with a nuanced analysis. It rejected the defendants’ claim that the trial court had erred in reforming the contract based on unilateral mistake, as they had not sufficiently challenged the finding of mutual mistake. As both claims of unilateral and mutual mistake were pleaded in the original complaint, and the plaintiff’s post-trial brief did not constitute an amendment of the complaint, both grounds for reformation remained valid.

The court underscored that it was not logically impossible for the trial court to find both mutual mistake and unilateral mistake coupled with inequitable conduct. This nuanced point emphasizes that even if a party testifies that a mistake was not common to both parties, the trial judge can still find that testimony to lack credibility. Consequently, they can grant reformation on the ground of mutual mistake, and simultaneously determine that unilateral mistake coupled with inequitable conduct was alternatively satisfied.

The appellate court also rejected the defendants’ claim that the plaintiff’s pre-lease execution conduct barred the reformation claim. It emphasized that negligence of the party seeking relief, such as failing to notice the mistake in the written instrument, does not preclude a claim for reformation. In this case, the plaintiff’s conduct was found to be negligent, but not reckless, thereby not precluding the plaintiff’s claim for reformation.

The takeaway from this case is multi-layered. It illustrates that the court system can provide a remedy in situations where a mistake – whether unilateral or mutual – occurs during contract drafting. But business owners should not count on using this remedy.  For one, the process of reformation might be costly and is best avoided.  Second, the court case for reformation is not as simple as a “do over.”  You will have to prove certain legal elements in order to prevail. The best strategy is to minimize the risk of such disputes arising in the first place.

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